Lafarge Africa Plc is sustaining a gain in momentum in revenue recovery that was recorded in the second half of last year. Group sales revenue accelerated from 8 per cent in 2020 to 12 per cent in the first quarter. This is however insufficient to permit full recovery in sales after the company lost 31 per cent of its peak turnover in 2019.
The gain in sales revenue in the first quarter is nevertheless sufficient to keep profit looking up after the company doubled profit from continuing operations in 2020. Management could not keep input cost under firm control but cost savings elsewhere enabled it to defend profit.
The cement producing company retained its ability to convert sales revenue into profit on year-on-year reading at the end of the first quarter. Net profit margin stood at 12.8 per cent in the first quarter, slightly down however from 13.4 per cent for the 2020 full year.
The company’s interim financial report for the first quarter operations in 2021 shows that it generated sales revenue of N71.5 billion for the period. This represents a year-on-year growth of 12 per cent – which indicates little or no gains in sales volume in the light of the significant increase in product prices.
Despite the improving sales, the company isn’t expected to regain its lost sales based on the first-quarter growth rate. Group turnover closed at N230.5 billion at the end of 2020, way down from the company’s revenue high of over N308 billion recorded in 2018.
Cost of sales grew slightly ahead of sales revenue over the review period at 13.7 per cent to over N52 billion compared to the 12 per cent improvement in turnover. This is detracting from the moderated behaviour of input cost last year that stretched out gross profit to a 20 per cent improvement.
At N19 billion in the first quarter, gross profit slowed down to 8 per cent improvement year-on-year. This was however compensated by some cost savings and other gains on the side of income.
Cost savings were led by a drop of 15 per cent in administrative expenses to close at a little over N4 billion for the period. Selling and marketing expenses also went down by 10.6 per cent to about N750 million. There was an equally big boost on the side of income by a shift from an impairment charge on receivables of N27 million to a reversal of N528 million over the review period.
These favourable developments enabled the company to achieve a 24 per cent leap in operating profit, amounting to N14.7 billion at the end of the first quarter.
Finance expenses are also going down after dropping by more than one-half at the end of last year. At N2.1 billion, finance expenses dropped by over 18 per cent year-on-year at the end of the first quarter. With an improvement in finance income, net finance costs went down by 21.4 per cent to N1.9 billion in the first quarter.
These developments summed up to a build-up in pre-tax profit to the tune of 36 per cent to N12.8 billion for Lafarge African in the first quarter.
A cost overrun however emerged from tax expenses, which claimed much of the increase in pre-tax profit in the quarter. Tax expenses rose by 176 per cent year-on-year to N3.6 billion, claiming 28.5 per cent of pre-tax profit, double the 14 per cent record in the same period last year.
The company has continued reducing its long-term borrowings from over N52 billion in 2019 to N5 billion at the end of 2020 and further to N3.8 billion at the end of March 2021. However short-term borrowings that multiplied four times last year have grown further from N44.5 billion at the end of 2020 to N50.6 billion at the end of the first quarter.
Lafarge Africa closed the first quarter trading with earnings per share 57 kobo, improving from 50 kobo per share in the first quarter of last year. It closed last year’s operations with earnings per share of N1.91 and paid a cash dividend of N1 per share.
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